service quality. moments of truth each customer contact is called a moment of truth. you have the...

Service Quality

Moments of Truth

• Each customer contact is called a moment of truth.

• You have the ability to either satisfy or dissatisfy them when you contact them.

• A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.

Dimensions of Service Quality

• Reliability: Perform promised service dependably and accurately. – Example: receive mail at same time each day.

• Responsiveness: Willingness to help customers promptly. – Example: avoid keeping customers waiting for no

apparent reason.

Dimensions of Service Quality

• Assurance: Ability to convey trust and confidence. – Example: being polite and showing respect for customer.

• Empathy: Ability to be approachable. – Example: being a good listener.

• Tangibles: Physical facilities and facilitating goods. – Example: cleanliness.

Perceived Service Quality

Word of mouth

Personal needs

Past experience

Expectedservice

Perceivedservice

Service Quality Dimensions

ReliabilityResponsiveness

AssuranceEmpathyTangibles

Service Quality Assessment1. Expectations exceeded ES<PS (Quality surprise)2. Expectations met ES~PS (Satisfactory quality)3. Expectations not met ES>PS (Unacceptable quality)

Service Quality Gap ModelCustomer

Perceptions

Customer

Expectations

Service

Delivery

Service Standards

ManagementPerceptions of Customer Expectations

Managing the Evidence

Conformance Service Design

Understanding the Customer

Customer Satisfaction GAP 5

Customer / Marketing Research

GAP 1

Conformance GAP 3

Communication GAP 4

Design GAP 2

Service Quality Gap Model

Quality Service by Design

• Quality in the Service Package– Budget Hotel example

• Taguchi Methods (Robustness)– Notifying maids of rooms for cleaning

• Poka-yoke (fail-safeing)– Height bar at amusement park

• Quality Function Deployment– House of Quality

Classification of Service Failureswith Poka-Yoke Opportunities

Server ErrorsTask:

Doing work incorrectlyTreatment:

Failure to listen to customerTangible:

Failure to wear clean uniform

Customer ErrorsPreparation:

Failure to bring necessary materials

Encounter:Failure to follow system flow

Resolution:Failure to signal service failure

House of Quality

Achieving Service Quality

• Cost of Quality (Juran)

• Service Process Control

• Statistical Process Control (Deming)

• Unconditional Service Guarantee

Costs of Service Quality

Failure costs Detection costs Prevention costs

External failure: Process control Quality planning Loss of future business Peer review Training program Negative word-of-mouth Supervision Quality audits Liability insurance Customer comment card Data acquisition and analysis Legal judgments Inspection Recruitment and selection Interest penalties Supplier evaluation Internal failure: Scrapped forms Rework Recovery: Expedite disruption Labor and materials

Service Process Control

Resources

Identify reasonfor

nonconformance

Establish measure of performance

Monitorconformance torequirements

Take corrective

action

Service concept

Customer input

Customer output

Service process

Control Chart of Departure Delays

expected

Lower Control Limit

1998 1999

n

pppUCL

1(3

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pppLCL

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Unconditional Service Guarantee: Customer View

• Unconditional (Big Bazaar)• Easy to understand and communicate (dish tv)• Meaningful (Domino’s Pizza)• Easy to invoke (Apparel)• Easy to collect (Manpower)

Unconditional Service Guarantee: Management View

• Focuses on customers (British Airways)• Sets clear standards (FedEx)• Guarantees feedback (Manpower)• Promotes an understanding of the service

delivery system (Bug Killer)• Builds customer loyalty by making

expectations explicit

Customer Satisfaction

• All customers want to be satisfied.

• Customer loyalty is only due to the lack of a better alternative

• Giving customers some extra value will delight them by exceeding their expectations and insure their return

Customer Feedback andWord-of-Mouth

• The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems.

• The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers.

• About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly.

• A dissatisfied customer will tell between 10 and 20 other people about their problem.

• A customer who has had a problem resolved by a company will tell about 5 people about their situation.

Walk-Through-Audit

• Service delivery system should conform to customer expectations.

• Customer impression of service influenced by use of all senses.

• Service managers lose sensitivity due to familiarity.

• Need detailed service audit from a customer’s perspective.

Patronage

LoyaltySatisfactionRetention

SeverityOf

Failure

PerceivedServiceQuality

Psychological-empathy-apology

Tangible-fair fix-value add

Psychological-apology-show interest

Follow-upService

Recovery

Tangible-small token

ServiceRecoveryExpectations

ServiceRecovery

CustomerLoyalty

ServiceGuarantee

Speed of Recovery

FrontlineDiscretion

ServiceFailure Occurs

ProviderAware ofFailure

Fair Restitution

Pre-recovery Phase Immediate Recovery Phase Follow-up Phase

Service Recovery Framework

Approaches to Service Recovery• Case-by-case addresses each customer’s complaint

individually but could lead to perception of unfairness.• Systematic response uses a protocol to handle complaints

but needs prior identification of critical failure points and continuous updating.

• Early intervention attempts to fix problem before the customer is affected.

• Substitute service allows rival firm to provide service but could lead to loss of customer.

Service Quality Gap ModelCustomer

Perceptions

Customer

Expectations

Service

Delivery

Service Standards

ManagementPerceptions of Customer Expectations

Managing the Evidence

Conformance Service Design

Understanding the Customer

Customer Satisfaction GAP 5

Customer / Marketing Research

GAP 1

Conformance GAP 3

Communication GAP 4

Design GAP 2

Service Quality Gap Model

The key drivers of the Knowledge Gap

23

Ineffective market research Insufficient market research Market research that asks the wrong questions Inadequate use of marketing research

Lack of upward communication Lack of direct interaction between management and customers Insufficient communication between contact employees and managers Too many layers between customers and top management

Insufficient relationship focus Lack of market segmentation – doing too little for too many Focus on transaction rather than relationships Focus on new customers at the cost of existing customers

Inadequate service recovery Lack of listening to customer complaints Failure to make amends when things so wrong No recovery mechanisms in place

The key drivers of the Standards Gap

24

Poor service design Unsystematic new service development process Fuzzy service designs Failure to connect service design to service positioning

Absence of customer-driven standards Lack of standards Absence of process management to focus on customer requirements Absence of formal process for setting service quality goals

Inappropriate physical infrastructure and servicescape Failure to develop tangibles in line with customer expectations Servicescape design does not meet customer and employee needs Inadequate maintenance and updating of the servicescape

The key drivers of the Delivery Gap

25

Poor human resource policies Ineffective recruitment Role ambiguity and role conflict Poor employee-technology fit Inappropriate evaluation and compensation Lack of empowerment, control and teamwork

Customers who do not fulfill roles Customers who lack knowledge of their roles and responsibilities Customers who negatively impact each other

Problems with service intermediaries Conflict over objectives and performance Difficulty controlling quality and consistency Tension between empowerment and control

Failure to match supply and demand Failure to smooth peaks and valleys of demand Inappropriate customer mix

The key drivers of the Communications Gap

26

Lack of integrated service marketing communications Tendency not to coordinate distinct pieces of communication Absence of interactive element Absence of strong internal marketing program

Ineffective management of customer expectations Absence of expectation management Lack of adequate education for customers

Overpromising In advertising In personal selling Through physical infrastructure cues

Inadequate horizontal communication Between sales and operations Between advertising and operations Differences in policies and procedures across branches and units

Remember

27

Knowledge – Standards – Delivery – Communications

Do I know what the customers wants?

If I know what the customer wants, have I designed the service standards accordingly?

If I have designed the service standards well, am I delivering to those standards?

Am I managing communications with the customer to set expectations and influence service perceptions in the best way possible?

K-S-D-C!

Potential projects

Copyright Dr. AK Rao28

Apply the GAP model of services to the project you have chosen

Evaluate what are the main gaps that negatively effect the service

experience. You may conduct in-depth interviews of customers at some

stage to make sure the gaps are what you “think” they are.

Following from your analysis, what strategy should your client adopt to

address each of the gaps? Detail the specific, actionable steps.

Topic 3: Two broad service “metaphors”


Two extreme metaphorical interpretations of services:

Service as drama (the emotional criterion)

Service as process (the efficiency criterion)

Most services are designed according to the efficiency criterion. Adding some drama can help distinguish services and make them memorable.

Combining the metaphors


All dramaAll process

Mix of drama AND process

Many great services reside here!!

Copyright Dr. AK Rao 31

Dramatic gestures need not be expensive ones! Small hole-in-the wall eatery owners (in India) will often cool down your boiling hot tea of coffee by pouring it between two vessels from a height.

Most services are process-intensive … some drama can help!


Pizza dough takes a leap…

Rumali Roti cooked on a tawa

Ways to inject drama


At the Jasmine Seafood Restaurant in San Diego, you can order fresh seafood or pick live seafood from one of six fish tanks. The claim: “Nothing is fresher than picking your own seafood swimming in the tanks.”

Ways to inject drama

34

Topic 4: Setting Standards and Designing services

– Approaches and ToolsEmployee-focused design

Service quality-focused design

Customer experience-focused design

Physical environment-focused design

Time target-focused design

Process flow-focused design

Activity ownership-focused design

Efficiency-focused design

Rewards and retention-focused designCopyright Dr. AK Rao

35

Old model: Puts workers who deliver customer-service last.

New model: Puts frontline workers first and designs the business system around them.

Value investments in people as much as investments in machines and sometimes more.

Use technology to support, not replace, the frontline.

Make recruitment and training as crucial for the frontline workers as for the top-line managers.

Link compensation to performance at every level.

Standards and Design Approach 1: Employee-focused standards and design

Core rationale for employee-focused standards and design

36Courtesy: http://www.marlow.com/AboutMarlow/Quality/profit5.gif

The service-profit chain: DiscussLet’s focus within the box…

www.fortune.com37

Wegmans does not hesitate to pay to attract really top culinary talent.

The company has shelled out $54 million for college scholarships to more than 17,500 full- and part-time employees over the past 20 years. It thinks nothing of sending, say, cheese manager Terri Zodarecky on a ten-day sojourn to cheesemakers in London, Paris, and Italy.

It invests in making employees experts in the foods they deal with.

It gives employees great flexibility in terms of what they can do to deliver great customer satisfaction.

How employee satisfaction drives employee loyalty and employee productivity: The Wegmans grocery chain

www.fortune.com38

All that means Wegmans' labor costs run between 15% and 17% of sales, compared with 12% for industry.

But its annual turnover rate for full-time employees is just 6%, compared to19% for similar grocery chains.

Almost 6,000 Wegmans employees—about 20%—have ten or more years of service, and 806 have a quarter-century under their belts.

All this in an industry where annual turnover costs can exceed profits by more than 40%,

While it has no publicly traded stock, its operating margins are about 7.5%, double what the big four grocers earn. Its sales per square foot are 50% higher than the $9.29 industry average.

How does this impact employee loyalty?

39

An important point

If a service delivery fails, look for both “human” and “systemic” failures. Don’t just yell at the human, that’s the easy thing to do!

Horst Schulze, the legendary leader of Ritz-Carlton Hotels describes how a manager solved the problem of room-service breakfasts arriving late and cold.

If you were the hotel manager and received complaints about meals arriving cold, what would you do?

Typical response: The hotel manager yells at the room-service manager, the room service managers yells at his subordinates, who in turn yell at the cooks, and the food delivery staff.

Copyright Dr. AK Rao

What really happened?

Employee-focused standards and design: What do you focus on?

40

Are you hiring employees right?

Are you hiring the right kind of people in terms of skills and capabilities?

Are you hiring the right kind of people in terms of personality fit?

Are you training employees right?

Are you providing your people with the depth and width of knowledge they require to perform excellently at their jobs?

Have you designed jobs so that your people can find meaning and joy at work?

Are you treating and motivating employees right?

Have you made employees feel valued?

Have you done away with dead-end jobs in your company?

Are you compensating your people well and saving money via higher retention, rather than trying to save by paying less in the short term?


How do customers evaluate service quality? The SERVQUAL framework

Tangible aspects Physical facilities, equipment, appearance of personnel

Reliability Ability to perform promised service dependably and accurately

Responsiveness Willingness to help customers and provide prompt service

Assurance Knowledge and courtesy of employees and their ability to inspire trust and confidence.

Empathy Caring, individualized attention the firm provides its customers


Standards and Design Approach 2: Service quality-focused standards and design

SERVQUAL Scale ItemsSERVQUAL Scale Items

Providing service as promised Dependability in handling

customers’ service problems Performing services right the first

time Providing services at the promised

time Maintaining error-free records

Keeping customers informed as to when services will be performed

Prompt service to customers Willingness to help customers Readiness to respond to customers’

requests

RELIABILITY

RESPONSIVENESS

Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer

customer questions

ASSURANCE

Giving customers individual attention Employees who deal with customers in a caring fashion Having the customer’s best interest at heart Employees who understand the needs of their

customers Convenient business hours

EMPATHY

Modern equipment Visually appealing facilities Employees who have a neat, professional

appearance Visually appealing materials associated with the

service

TANGIBLES

Copyright Dr. Valarie Zeithaml


Implementing SERVQUAL

SERVQUAL is best implemented in a Satisfaction = Performance – Expectations framework.

Therefore, ideally, one should measure both expectations and performance.

Ideally, one should temporally separate the measures of expectations and performance.

Here are the systematic steps to follow…


Implementing SERVQUAL: Step 1

Measure expectations using a 7 point Likert scale. Measure expectations for each item under Reliability, Assurance, Responsiveness, Empathy and Tangibles.

A typical item in this Expectations measurement survey could be:

Survey header: These questions pertain what you consider to be the absolutely excellent firms in the service category.

When customers have a problem, excellent firms will show a sincere interest in solving it.

Strongly disagree Strongly agree.

1 2 3 4 5 6 7

Ask these expectations for the “excellent firms” for all the items in the SERVQUAL instrument (see previous slide).

Important: At the end of the survey, ask participants to allocate 100 points between Reliability, Assurance, Responsiveness, Empathy and Tangibles



Let some time pass.

Measure performance evaluations for the target company using a 7 point Likert scale. Measure expectations for each item under Reliability, Assurance, Responsiveness, Empathy and Tangibles.

A typical item in this Expectations measurement survey could be:

When customers have a problem, company XYZ shows a sincere interest in solving it.

Strongly disagree Strongly agree.

1 2 3 4 5 6 7

Ask these evaluations for firm XYZ for all the items in the SERVQUAL instrument (see previous slide). Use consistent wordings as for the Expectations survey.

Important: At the end of the survey, ask the respondents for an overall measure of satisfaction with company XYZ’s service, using a 7 point scale (“Not at all satisfied” to “Very satisfied.”)



Analyze and report the data. Consider using the following format.

Alternatively, you can report the data at the level of the individual items.

You can also perform a regression with overall satisfaction as the dependent variable and the gap scores as the explanatory variables to understand what exactly is driving customer satisfaction…

Service-quality focused standards and design: Summary

47

The SERVQUAL approach offers a well-tested, robust approach to measure service quality.

The focus here is on designing services that ultimately rate well when their quality is measured using the SERVQUAL framework.


Standards and Design Approach 3: Customer experience-focused standards and

design

48

Careful attention to the pattern of customer experiences

Application of knowledge regarding customer perceptions and cognitions

Here are the systematic steps to follow…


Figure from “Pricing and the Psychology of Consumption” by John Gourville and Dilip Soman in Harvard Business Review, September 2002.

Step 1: Manage the timing of payments and consumption

49

Payments and consumption at a Chicago health club…

Step 2: Manage the sequence of the service experience with care

50Copyright Dr. AK Rao

Qu

alit

y o

f se

rvic

e e

xpe

rien

ce

Time

Quiz: What would determine the final customer memories of the experience?

Finish strong and maintain strong “high points”

51

Finish strong:

Cruise lines end each day with raffles, contests, shows.

End cruise with the captain’s dinner

Pass out keepsakes or wine bottles on reaching the home port


Get the bad experiences out of the way early

52

Delayed planes: Let customers know about the delay and the reason as soon as possible.

Doctors: Perform uncomfortable procedures first.

Deliver the bad news as soon as possible.


Step 3: Build commitment through choice

53

Giving customers choices makes them feel empowered.

XEROX: Had problems with providing service for customers on account of cross-scheduling and lack of timely appearance.

Xerox implemented a system that allowed customers to rate the severity of the problem and the time by which they needed attention.

personnel would arrive more quickly for an urgent problem than for a minor one.

Customer satisfaction increased sharply, and the number of repair calls went down. Discuss: Why?Copyright Dr. AK Rao

Step 4: Given people rituals and stick to them

54

Rituals help customers find comfort, familiarity, and order.

The famous McKinsey “uh-huh, uh-huh..”


Step 5: Reduce the amount of “uncertain” wait

55

You have a doctor’s appointment at 9 AM.

You arrive at 8.40 AM.

You cheerfully wait until 9 AM.

But, by 9.04 AM, you are restless and unhappy.

You don’t know how much longer it is going to take.


Summary: Customer experience-focused standards and design

56

Careful attention to the pattern of customer experiences

5 Steps to keep in mind towards designing the customer experience in the service environment.


Standards and Design Approach 4: Process flow-focused standards and

design

57

Key tool: “Service blueprint”

Breakdown of the service delivery process into: Physical evidence Customer actions Onstage employee actions (employee “in touch” with

customers) Backstage employee actions Service support processes

Example…


58 Reproduced from “Services Marketing” by Zeithaml, Bitner and Gremler.

Summary: Process flow-focused standards and design

59

Key tool: “Service blueprint”

Useful because: It provides a certain concreteness to the service experience It helps managers build new services It helps managers redesign existing services It helps managers understand how some actions at one part

of the service process can affect outcomes that may seem distant from that part of the process (e.g., It helps ALL hotel staff to know that a particular guest has been let down by the hotel staff in some context.)


Standards and Design Approach 5: Time target-focused standards and

design

60

Careful attention to bringing down the total elapsed time between order and service delivery.

The story of Jefferson Pilot Financial*: JPF undertook a detailed examination of its New Business Unit’s operations.Considerable variation on service quality:

Applications requiring physician’s statement took 1-2 months for processing.

Processing times for other applications were even more variable – 35% standard deviation.

10% of all applications required rework.

JPF decided to learn from the manufacturing industry – a 5-person “lean team” was set up…

*Adapted from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003.

Targets and results at Jefferson Pilot Financial

61Figure from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003.

The secret?

62

Adoption of the “model-cell” approach in which the company sets up a fully functioning microcosm of its entire process in one of its businesses.

The serves almost as an experiment – learning helps refine the process design.

Broad transformation approach follows.

Steps to be followed…


Cellular production

63

The cellular approach is to organize the entire manufacturing process for particular or similar products into one group of team members and machines known as a "Cell". These "cells" are arranged in continuous layout to facilitate a variety of operations.

Steps to design such a process in a service context…From: http://www.cellularmanufacturing.com/Pages/whatmain.html Copyright Dr. AK Rao

Cellular service “production” : Step 1: Co-locate linked processes

64

Another advantage: The old attitude: “All I’m responsible for is XYZ” began to fade.

All steps in the process should physically proximate.

At JPF, work groups were located by function.

Employees receiving applications from independent advisors/agents and those sorting them were on different floors – one day or more for the files to be transferred by internal mail.

Once receivers and sorters were co-located, it took just a few minutes.


Step 2: Standardize procedures

65

Physical workspace was reconfigured so that the supervisor could, while walking by, determine the level of pending and processed files.

JPF had given employees considerable latitude in managing their work.

What resulted was a mix of filing and sorting systems – some did it by policy holder, others by policy numbers…

When employees were absent, substitutes found it difficult to manage.

The lean team insisted that all files be stored alphabetically in a specific drawer at each work station.


Step 3: Eliminate “loopbacks”

66

The change also eliminated role and effort allocation confusion on the part of employees and reduced delays.

A loopback occurs when work returns to a previous stage for processing.

JPL recognized that all sections of the initial application were sent back to the receiver to be sorted, physically assembled and turned in to the insurance advisor interacting with the client…this led to delays in processing new applications…leaving the downstream idle.

JPL split the receiving team in half, allocating the halves separately to receiving and to reassembling policies.


Step 4: Set a common tempo

67

JPL smoothed out the work flow by applying the concept of “takt” time (German for musical meter)

To satisfy market demand, each cell in the New Bus. division had to process 10 applications/hour.

The takt time was one application every 6 minutes.

The lean team members timed each work element of the model cell, such as retrieving the application, keying in information, etc.

They established a “base time” for each application, and challenged the cell members to beat it.


Step 5: Balance loads in the service production line

68

JPL recognized that its work allocation system was inefficient. JPF had allocated incoming applications by channel (doctor/no-doctor) and then alphabetically.

Therefore, an application from Tom Anderson would go to the A-C team even if another team was idle.

In the model cell, alphabetical allocation was replaced by sequential allocation so each team received the same number of allocations.

This utilized employees better and was also perceived to be more fair.


Step 6: Segregate complexity

69

Ever stood in line at a bank behind a customer who took forever?

At JPL, applications that needed and did not need a physician’ statement were all processed together.

The model cell divided itself into two groups to handle each of these application types.

The turnaround time for cases not needing a doctor’s statement fell more than 80%!


Step 7: Establish appropriate target metrics and post results

70

A firm’s metrics may impede productivity. For example, a call center that measures time spent on phone by reps could suffer from repeat calls and unsatisfied customers.

Lean production principle: Measure performance and productivity from the customer’s perspective.

Old metric: Time from application receipt by the New Business division to the time the approved policy was bound and printed. New metric: Time from application mailing by customer to the time the independent advisor receives a completed policy.


Step 7: Establish appropriate target metrics and post results

71Figure from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003.

Summary: Time target-focused standards and design

72

Careful attention to the time spent in processing customer services.

Redesign of the service “factory” using lessons from cellular manufacturing.

7 Steps to keep in mind towards reducing the total time required to deliver the customer service (as viewed from the customer’s perspective).


73Copyright Dr. AK Rao

Standards and Design Approach 6: Physical environment-focused standards and

design

74

Careful attention to designing the “props” or the elements of the physical environment in which the service is delivered.

The story of the Mayo Clinic*: Mayo understands that its customers look for evidence of competence,

caring and integrity, drawing inferences about what they cannot see from what they can see.

Mayo does not leave the nature of the physical evidence to chance – instead it uses every opportunity to offer patients and their families concrete and convincing evidence of its strengths and values.

This process of “evidence management” is an organized, explicit approach to present customers with coherent, honest evidence of your capabilities.

How does the evidence management process work at Mayo Clinic?

*Based on “Clueing in Customers” by Leonard L. Berry and Neeli Bendapudi in Harvard Business Review.

STEP 1: Setting up the clues in peopleMake customers the center of the organization

75

Mayo patients describe their care as being organized around their needs rather than the doctor’s schedule or the hospital’s processes.

Consistent focus on patients is the Mayo culture:

“When I had a colonoscopy, my doctor waited personally to tell me I had a polyp because he remembered my husband died from small bowel cancer and he knew I would be worried I had the same thing.”

“My oncologist is…the kindest man I have ever met. He related some of his personal life to me. I was more than my problem to him. He related to me as a person.”

William Mayo’s credo: The best interest of the patient is the only interest to be considered.”


Setting up the clues in peopleHire customer-oriented people

76

Mayo’s interviews of prospective employees are focused on eliciting information about their values, rather than getting them to choose the correct “answer.”

For example, an applicant who identifies making a difference in a patient’s life as their proudest moment is more likely to fit in with the Mayo culture than one who recounts achieving a career milestone.

The feeling of pride and the alignment of the employees’ attitudes with the Mayo culture lowers turnover across the board – 4% versus industry-wide 20% for nurses.


Setting up the clues in peopleUse storytelling to set lofty employee standards

77

Another STORY recounted during training…

A critically ill patient was admitted to the Scottsdale hospital just before her daughter’s wedding and was unlikely to live to see it.

The bride told the hospital chaplain how much she wanted her mother to witness the wedding.

Within hours, the hospital atrium was transformed into a wedding chapel with flowers, balloons and confetti. The cake was supplied by the employees, and hospital chaplain officiated. A volunteer played the piano.

On every floor, hospital staff, patients, and visiting families ringed the atrium balconies, like “angels from above” to quote the bride.


STEP 2: Setting up the clues in collaborationCoordinate resources towards delivering customer service

78

From Mayo, patients perceive an integrated coordinated response to their medical conditions, AND to their psychological, social, spiritual, and financial needs.

If a doctor cannot answer a question, she freely admits it to the patient and brings the relevant expert into the team.

Patient: “I have a lot of problems, and I like that I can go to Mayo and be seen by a team of specialists who work together to see the big picture.”


STEP 2: Setting up the clues in collaborationDesign incentives to support coordination

79

All physicians are salaried so they don’t lose money by referring patients to colleagues.

A cardiac surgeon: “By not having our economics tied to our cases, we are free to do what comes naturally…to help one another.”

The “star billing” system is discouraged… doctors who want to shine alone and maximize income don’t work at Mayo.

A physician: “I never feel I am in a room by myself, even when I am.”


STEP 2: Setting up the clues in collaborationCreate technologies and abilities that support coordination

80

Mayo admitted a skin cancer patient at risk for metastasis, and owing to impending surgery at risk for nerve injury and disfigurement.

The Mayo ENT specialist in Scottsdale called together 20 doctors from 3 campuses to discuss the case.

The team, assembled in a day, met by videoconference for 1.5 hours and reached a consensus on the course of treatment, including how to sample the patient’s lymph nodes and reconstruct the surgical wound.


STEP 2: Setting up the clues in collaborationMake the coordination transparent to the patient

81

Mayo’s electronic medical record (EMR) system improves the clinic’s ability to present a seamless, collaborative organization to the patient.

A patient: “On my last visit, the doctor pulled up all my test scores from the past five years on a computer and showed me the trends and we discussed what to do. I thought that was excellent.”


STEP 3: Setting up the clues in tangiblesMake the “entry” and public spaces friendly

82

Mayo’s facilities have been designed explicitly to relieve stress, offer refuge, and create positive distractions.

Architect: “I would like the patients to feel a little better before they see their doctors.”

The Gonda building has spectacular open spaces, marble stairwell and floor, and a multistory wall of windows overlooking a garden.

Mayo Clinic’s Gonda Building in Rochester, MN.


STEP 3: Setting up the clues in tangiblesMake the private spaces more accessible and friendly

83

In examination rooms, the physician’s desk is adjacent to a sofa large enough for the patient and family members – this removes the desk as a barrier between doctors and patients.

Staff members write down the names of attending doctors and nurses in every patient’s room, which helps patients keep track of multiple caregivers and lets them know that there’s a real person in charge.

In hospital showers, microwaves, and chairs that convert to beds are available for family members.

Mammography room at Mayo Clinic’s Gonda Building in Rochester, MN.


STEP 3: Setting up the clues in tangiblesMake the private spaces more accessible and friendly

84

The resuscitation equipment in pediatric examination is hidden behind a large picture (which slides out of the way when the equipment is needed).

At the Scottsdale campus, a car was lifted into the building to help patients in physical rehabilitation practice getting in and out in the privacy of the hospital.

Buildings include quiet, darkened spaces where patients can rest between appointments.

A patient: “It did not seem like a doctor’s office when we went to Mayo. There was no tension.”

Mayo Clinic’s Gonda Building in Rochester, MN: A library is available for patients to learn more about their diagnosis, with access to health educators to assist in their research.


STEP 3: Setting up the clues in tangiblesPay attention to detailed physical evidence

85

Story of the dirty shoelace, as recounted by employee Mary Ann Morris

A supervisor noticed that her shoelaces were dirty where they were threaded through the eyelets of the shoes and asked her to clean them.

Morris was offended and noted that she worked in a lab, not with patients.

Her boss replied that Morris has contact with patients in ways she did not recognize – in the street with her badge on, or passing them on the hospital floors.

Morris understood, over time, that everything she did, down to her shoelaces, represented her commitment and that of the Mayo Clinic to patients and visitors.


Summary: Physical environment-focused standards and design

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Careful attention to designing the “props” or the elements of the physical environment in which the service.

Organizations must “clue-in” customers by paying attention to:

Setting up clues in people Setting up clues in the collaborative process Setting up clues in the tangibles


Standards and Design Approach 7: Activity ownership-focused standards and

design

87

Careful attention to how you can design services that address the customer’s broader problem “scenario.” Particularly useful in the context of the Internet.

The story of National Semiconductor’s Webench*: Design engineers construct electronic devices for their companies or for

their manufacturing agents. The design engineers do not buy in bulk but their role early in the

product development process can lead to large orders down the road. In 1994, NS established a website to provide product information to

design engineers – the website was successful, but Phil Gibson, NA’s vice-President of Web business believed it could do much more.

In the late 1990s, Gibson launched an ambitious effort to better understanding how design engineers work and how they could be supported…

* Based on “Get inside the lives of your customers” by Patricia B. Seybold in Harvard Business Review (May 2001).

Going about it: Map customer activities

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On studying the design engineer’s scenario in the context of building a power supply unit, the SWAT team assembled by Gibson broke down their tasks into 4 steps:

Choose a part

Create a design

Analyze the design (using powerful simulation tools)

Build a prototype


Going about it: Facilitating the mapped activities

89

NS created a set of online applications called Webench:

The engineer specifies the overall parameters of the power supply unit and identify key components.

Webench automatically generates possible designs, tech specs, parts lists, prices, and cost-benefit analyses.

The engineer refines designs until a satisfactory one appears.

The engineer can run real-time simulations of the design, using a software NS has licensed and offers on the site.

The engineer can alter the design and rerun the simulation as often as needed.

The engineer can save all the iterations in a private portfolio or e-mail them to colleagues who can run the simulations.

With a mouse click, the system can generate a bill of material for the final prototype that may include parts from NS and other companies.Copyright Dr. AK Rao

http://www.national.com/appinfo/webench/scripts/my_webench.cgi

Going about it: Some early missteps

90

At the outset, NS decided to charge engineers to use the simulation tool to recoup the costs of licensing the software.

Engineers came to the site in droves but backed out when asked to input their credit card number. Comment?

Solution

NS realized that instead of nickel and dime-ing customers, the bigger rewards were down the road –large orders!

Gibson: “One integrated-socket win with Nokia translates into 40 million units for us”

It provided the simulation facility for free.Copyright Dr. AK Rao

The result

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Webench configured 20,000 power supplies/year.

Engineers finished in hours what took them days.

They explored alternatives they would never have before…one engineer went through 250 iterations.

Engineer: “Using these tools, I can go from an idea to a prototype in a few clicks. NS has thought of everything I need—from a huge catalog of parts to fast simulations.”

By Fall 2000, 31000 individuals were visiting the website and generating 3000 orders every day.

NS estimates it saves customers an average of 50 hours, or $3000 in monetary savings per design.

Expanded concept to design circuitry as well.


Summary: Activity ownership-focused standards and design

92

Careful attention to how you can design services that address the customer’s broader problem “scenario.”

By focusing on the problems that customers face rather than the offerings that they buy, you can find ways to make life easier for them.


Standards and Design Approach 8:


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Careful attention to how you can design services that give the greatest (output/input) ratio.*

Need to consider both the customer and the provider perspectives.

The following principles can help find opportunities for designing efficient services…

* Based on “Lean Consumption” by James P. Womack and Daniel T. Jones in Harvard Business Review (March 2005).

Principle 1: Tackle the source, not the symptoms of inefficiency

94

Fujitsu Services provides IT services and call centers globally. Fujitsu was often paid “per complaint handled.”

Fujitsu took over the desk contract for BMI Airlines in 2001. Fujitsu found that over half the calls to the help desks were from airline agents whose printers broke down. – they could not print boarding passes and baggage tags. Even flights were delayed on this account.

Fujitsu determined that the problem was with the low quality printers deployed by BMI. Fujitsu convinced BMI to upgrade these printers.

The number of printer related calls were cut down by more than 80% in 18 months.

Simultaneously, Fujitsu negotiated with BMI to change its payment terms to “number of potential users of the IT desk services.”


Principle 2: Manipulate demand to maximize asset utilization

95

Demand for tennis at a Southeastern US resort peaked in July and August, way beyond capacity.

New, distant courts would cost $12,000 each.

How the resort managers reacted: Warned guests about overcrowding. Reservation system that steered demand to

non-peak times of the day Charged double play the same as single play Set up tennis mixers and round robins to

facilitate partner picking for doubles play Opened courts at 6 AM Added floodlights for night play Intensively promoted alternative activities Tennis became a profitable operation!

* Based on “Match supply and demand in service industries ” by Earl Sasser in Harvard Business Review (December 1976).

Principle 3: Increase customer participation

96

Vinoklet Winery in Cincinnati takes self-serve to a new level: On weekend evenings, you grill your own meal.

Customer review: “After helping ourselves to bread and crunchy green salad (included), our uncooked entrees arrived at our outdoor table. With some trepidation I headed toward the huge industrial grill, surrounded by repeat Vinoklet visitors who extolled the virtues of this beautiful place while deftly seasoning and turning their own meals, not needing the posted directions.” I did a bang-up job on our New York strip steak ($17.95)…”

Some of the foods available for self grilling at include chicken, steak, fish,and pork chops.


Principle 4: Move away from the culture of “face time”

97

Marriott managers had to cope with a historical culture of “face time”—the longer you were at work, the better.

Result: Discontented employees who did not see their future there.

“Management Flexibility” test program was launched at 3 Marriott hotels.

Only truly necessary meeting were scheduled. Managers attended only those parts of the

meeting that were relevant to them. Front desk managers’ schedules traditionally

overlapped one hour—reduced to 15 minutes.

At the end of the test, managers at the 3 hotels were working 5-7 hours less per week.

Customer satisfaction and managerial productivity stayed strong; retention improved.

Boston’s Copley Marriott was one of the program test sites.

* Based on “Changing a culture of face time” by Bill Munck in Harvard Business Review (November 2001).

Move away from the culture of “face time”

98

PERCENTAGE OF MARRIOTT MANAGERS WHO SAID…

“The emphasis is on hours worked, not on things accomplished.”

“My job is so demanding, I can’t take care of personal/family responsibilities”

“I feel drained at the end of the day”

“Management is supportive of less face-time.”

Before pilot test After pilot test

43%15%

77%36%

83%59%

56%73%

Summary: Efficiency-focused design

99

Careful attention to how you can design services that give the greatest (output/input) ratio.*

Need to focus on creating both internal (within-firm/operational) and external (customer-focused) efficiencies.

We covered 4 principles can help find opportunities for designing efficient services.

Standards and Design Approach 9: Rewards and retention-focused

design

100

Careful attention to how you can design services and associated rewards that promote customer loyalty and increased spending.

Closely related to the customer lifetime value concept.

The following principles can help managers design the RIGHT kind of loyalty and retention programs…


Design discount programs and other customer incentives that create, rather than transfer, value

101

Rewards Network offers discounts at chosen restaurants for an upfront payment.

Rewards Network pays restaurant owners some cash upfront to participate in the program – mostly cash-strapped ones jump in.

Faced with this competition, other well-performing restaurants have jumped in.

In the long run, the restaurants do not benefit – customers and Rewards Network do! Why? Problem with incentive design: Restaurant goers get the same discount at

any restaurant – not linked to consumption patterns. The fact that the discount is available at multiple restaurants promotes

switching. Little real value is created – the program does not ensure that customers will

dine out more often or that they will focus on a single or a few restaurants.Copyright Dr. AK Rao

http://www.rewardsnetwork.com/index.jsp

Summary: Rewards and retention-focused design

102

Rewards and retention strategies must aim to reward the right customers, must ideally be linked to usage patterns and must ultimately benefit the FIRM that provides the rewards.

Your best customers may not need the rewards…make sure you are not overspending on them.

Managers must design the RIGHT kind of loyalty and retention programs…


103

Designing and delivering quality services – done so far…

Employee-focused design

Service quality-focused design

Customer experience-focused design

Physical environment-focused design

Time target-focused design

Process flow-focused design

Activity ownership-focused design


Rewards and retention-focused design


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service quality. moments of truth each customer contact is called a moment of truth. you have the...

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